Later work showed that when acetylcholine binds to acetylcholine receptors on skeletal muscle fibers, it opens ligand gated sodium channels in the membrane. Sodium ions then enter the muscle cell, stimulating muscle contraction. Acetylcholine, while inducing contraction of skeletal muscles, instead induces decreased contraction in cardiac muscle fibers. This distinction is attributed to differences in receptor structure between skeletal and cardiac fibers. Acetylcholine is also used in the brain, where it tends to cause excitatory actions. The glands that receive impulses from the parasympathetic part of the autonomic nervous system are also stimulated in the same way.

Acetylcholine is synthesized in certain neurons by the enzymecholine acetyltransferase from the compounds choline and acetyl-CoA. Organic mercurial compounds have a high affinity for sulfhydryl groups, which causes dysfunction of the enzyme choline acetyl transferase. This inhibition may lead to acetylcholine deficiency, and can have consequences on motor function.

Normally, the enzyme acetylcholinesterase converts acetylcholine into the inactive metabolitescholine and acetate. This enzyme is abundant in the synaptic cleft, and its role in rapidly clearing free acetylcholine from the synapse is essential for proper muscle function. The devastating effects of organophosphate-containing nerve agents (e.g. Sarin gas) are due to their irreversible inactivation of this enzyme. The resulting accumulation of acetylcholine causes continuous stimulation of the muscles, glands and central nervous system; victims commonly die of suffocation as they cannot contract their diaphragm. Other organophosphates and some carbamates are effective insecticides because they inhibit acetylcholinasterase in insects. On the other hand, since a shortage of acetylcholine in the brain has been associated with Alzheimer's disease, some drugs that inhibit acetylcholinesterase are used in the treatment of that disease. A recent study [1] has shown that THC is one such drug, effective at reducing the formation of characteristic neurofibrillary tangles and amyloid beta plaques.

Muscarinic receptors are metabotropic and affect neurons over a longer time frame. They are stimulated by muscarine and acetylcholine, and blocked by atropine. Muscarinic receptors are found in both the central nervous system and the peripheral nervous system, in heart, lungs, upper GI tract and sweat glands. Extracts from the plant included this compound, and its action on muscarinic AChRs that increased pupil size was used for attractiveness in many European cultures in the past. Now, ACh is sometimes used during cataract surgery to produce rapid constriction of the pupil. It must be administered intraocularly because cornealcholinesterase metabolizes topically administered ACh before it can diffuse into the eye. It is sold by the trade name Miochol-E (CIBA Vision). Similar drugs are used to induce mydriasis (dilation of the pupil) in cardiopulmonary resuscitation and many other situations.

The disease myasthenia gravis, characterized by muscle weakness and fatigue, occurs when the body inappropriately produces antibodies against acetylcholine receptors, and thus inhibits proper acetylcholine signal transmission. Over time the motor end plate is destroyed. Drugs that competitively inhibit acetylcholinesterase (e.g., neostigmine or physostigmine) are effective in treating this disorder. They allow endogenously released acetylcholine more time to interact with its respective receptor before being inactivated by acetylcholinesterase in the gap junction.

Acetylcholine also has other effects on excitability of neurons. Its presence causes a slow depolarization by blocking a tonically active K+ current, which increases neuronal excitability. Paradoxically, it increases spiking activity in inhibitory interneurons while decreasing strength of synaptic transmission from those cells. This decrease in synaptic transmission also occurs selectively at some excitatory cells: for instance, it has an effect on intrinsic and associational fibers in layer Ib of piriform cortex, but has no effect on afferent fibers in layer Ia. Similar laminar selectivity has been shown in dentate gyrus and region CA1 of the hippocampus. One theory to explain this paradox interprets acetylcholine neuromodulation in the neocortex as modulating the estimate of expected uncertainty, acting counter to norepinephrine (NE) signals for unexpected uncertainty. Both would then decrease synaptic transition strength, but ACh would then be needed to counter the effects of NE in learning a signal understood to be noisy.